UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 15812
/ July 16, 1998
SECURITIES AND EXCHANGE COMMISSION v. JOHN W. GILLETTE, JR.,
Civil Action No. 98- CV 1265S CGA (S.D. Cal.).
The Securities and Exchange Commission (Commission) announced
that on July 10, 1998, it filed and settled an action in United
States District Court against John W. Gillette, Jr. (Gillette).
The Commission's complaint alleged that, from June 1994 through
July 1997, Gillette, a resident of San Diego, California, acted
as an unregistered investment adviser to over 85 clients, most of
whom were professional athletes. The Commission further alleged
that Gillette made materially false and misleading statements
when recommending investments to these clients, and
misappropriated client monies, resulting in client losses of over
$11 million. Among other things, the Commission alleged that
Gillette misappropriated his client's investment profits, paid
certain clients with other clients' monies, and represented he
had invested client funds in partnerships and municipal bonds
when in fact he had misappropriated those funds. In addition,
the Commission alleges that from late 1993 through June 1994,
Gillette, who was a registered representative at the time,
liquidated the securities of a brokerage firm client without her
knowledge, and misappropriated over $400,000 from her account for
his personal benefit. The Commission alleged that Gillette spent
the misappropriated funds on, among other things, his family's
personal expenses, his company's overhead expenses, and to invest
in undisclosed business ventures. Finally, the Commission
alleged that, by giving investment advice to his clients in
exchange for a fee, Gillette was acting as an unregistered
investment adviser.
Without admitting or denying the Commission's allegations,
Gillette agreed to be permanently enjoined from future violations
of Section 17(a) of the Securities Act of 1933, Section 10(b) of
the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and
Sections 203(a), 206(1), and 206(2) of the Investment Advisers
Act of 1940.